TaxTMI 
TaxTMI 
2025 (2) TMI 688
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....ntor (PG). Brief facts of the case 2. Brief chronology relevant for appreciation of the issues involved in the case is a follows : 1. 2007-2012 NaftoGaz India Pvt Ltd took various credit facilities from SBI and SBBJ in which the Appellant was the Personal Guarantor. 2. 28.01.2012 Loan account of NaftoGaz India Pvt Ltd was classified as NPA by SBBJ 3. 13.06.2012 Loan account of NaftoGaz India Pvt Ltd was classified as NPA by the SBI 4. 08.10.2012 NaftoGaz India Pvt Ltd went into liquidation vide Order passed by the High Court of Delhi. 5. 26.12.2013 SBI sent Demand Notice dated 26.12.2013 under Section 13(2) of SARFAESI Act, 2002, calling upon to repay the amount of Rs 64.48 crs (approx.). 6. 2014 SBI filed OA No. 133 of 2014 before the Debt Recovery Tribunal, New Delhi, and the same is pending adjudication till date. 7. 28.06.2021 Respondent No. 1/SBI sent a Demand Notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rule, 2019, demanding payment of Rs 264.61 crs - as on 31.05.2021. 8. 03.....
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....order dated 08.12.2010 as per the orders of the Hon'ble High Court of Delhi. The loan account of Company was classified as NPA on 28.01.2012 by SBBJ and by SBI later on 13.06.2012. SBI sent a Demand Notice dated 26.12.2013 under Section 13(2) of SARFAESI Act, 2002^3 calling upon the Company and the Appellant to repay the amount of about Rs 64.48 crores. Later on, in the year 2014, SBI also filed OA No. 133 of 2014 before the Debt Recovery Tribunal (DRT), New Delhi, and the same is still pending. No decree has been passed in the same. After about 7 years, in 2021, Respondent No.1-SBI sent a Demand Notice dated 28.06.2021 under Rule 7(1)^1 demanding payment of about Rs 264 cores. This Demand Notice refers to four loan accounts, two from SBI (i.e. CC(SBI)-30451182299 and BG(SBI)-30449964100) and two from SBBJ (CC)SBBJ)-61253087296 and BG(SBBJ)-61074975160). No explanation was provided as to how the figure of Rs 264.61 crores was arrived at, or against which loan account how much amount was sought for. It is also claimed that the Application under Section 95(1) of IBC mentions only one loan account of SBI out of the four loan accounts. Respondent No. 1 - SBI filed Application under Sec....
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....as also on the records of the proceedings of the DRT, New Delhi. Despite knowing the correct address, email address and mobile number of the Appellant, the Respondent No.1 chose not to serve the Demand Notice to the Appellant on the correct address and email ID, instead chose to send the Demand Notice on the address of E-14/13, Ground Floor, Vasant Vihar, New Delhi-110070. This, the letter was the address of the company which has gone into liquidation vide order dated 08.10.2012 by Hon'ble High Court of Delhi in the matter titled as Royal Marine vs Naftogaz India Private Limited being Company Petition No. 128 of 2011. The aforesaid company/residence of the Appellant and other assets of the Company including books of accounts were taken over by the Official Liquidator attached to the Hon'ble High Court of Delhi. 7. It is the contention of the Appellant that where a statute requires a particular act to be done in a particular manner, the act has to be done in that manner alone and, therefore, the service of Demand Notice under Rule 7(1) cannot be substituted with the service of notice under Section 13(2) of SARFAESI Act, 2002. The service of Demand Notice under Rule 7(1) is a mand....
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....sel for the Personal Guarantor has no objections for these documents, to be taken on record. We have heard the submissions made by the parties. The parties are at liberty to file written submissions, if any, within one week. AJAY Order Reserved." 12. With respect to the issue of Demand Notice under Rule 7 (1) of the IBC Rules of 2019, NCLT, in its Impugned Order dated 13.06.2024, and also by the Respondent No. 2-RP in its Report, has categorically stated that the Demand Notice dated 28.06.2021 under Rule 7 (1) of the 1BC Rules, 2019, was served to the Appellant on the address mentioned in his passport and bank records. Thus, the Appellant cannot argue that he should not have been served at the address mentioned in his passport since the passport is a valid ID and address proof. 13. Even otherwise, the copy of the Demand Notice under Rule 7 (1) as also the copy of the Section 95 IBC Petition was sent to the Appellant by the Respondents. Thus, no prejudice has been caused to the Appellant as the dues and factum of guarantee are an admitted position and the Appellant failed to provide the details of repayment of debt. 14. It is to be noted that the PG has not denied ....
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....29 (CB)/2022: Canara Bank vs Grids Steel and Alloys Ltd., NCLT, Cuttack Bench; and also in judgment dated 20.03.2023 rendered in Company Appeal No. 25/252 (ND)/2022: Income Tax Officer-Ward 7 (1) New Delhi vs The Registrar of Companies & Ors., NCLT, New Delhi Bench, after relying upon the observations of the Hon'ble NCLAT passed in judgment dated 10.01.2022 in Company Appeal (AT) (Ins.) No. 936/2021: M/S Essjay Ericsson Pvt Ltd vs M/S Frontline (NCR) Business Solutions Pvt Ltd. 17. Thus, once the Section 95 IBC Petition is within the limitation, the objection/contention of the Appellant has to be rejected. 18. The Appellant is trying to build its case that the Impugned Order dated 13.06.2024 does not deal with the objections as regards the issue of 'limitation'. However, the issue of 'limitation' was already argued during the hearing dated 29.05.2024 in which even the Counsel for the Appellant stated no objection to the filing of the Order dated 17.03.2018 passed in O.A. No. 213/2013, which actually put the issue of 'limitation' to rest and nothing more was needed to be done. 19. With respect to this issue of Demand Notice under Rule 7(1) sent to th....
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..... 1-SBI even during the pendency of the Section 95 IBC Petition. Thus, the NCLT has rightly rejected the objection/contention of the Appellant as regards serving of the Rule 7 (1) Notice. 22. On the issue that the amount sought for in the Demand Notice and the Section 95 of IBC Petition are vague, it is contended that the Respondent No. 1-SBI had duly provided the amount of debt in default as also the copy of statement of accounts to the PG. Thus, the objection/contention of the Appellant that the amount mentioned is vague is without legs. Moreover, the amount of debt in default was stated to be more than Rs 264 crores, which the Respondent No. 2-RP would always analyse while collating the claims. In any case, the Hon'ble NCLAT in 'Company Appeal (AT) (Ins) No. 662-663 of 2022: Suzlon Synthetics Ltd vs Stressed Asset Stabilisation Fund (2022) 145 taxmann.com 594 (NCLAT-New Delhi)' has held that the Adjudicating Authority does not have to calculate and fix the amount in default but only has to see that the amount in default is more than the threshold. In view of this, since the amount of debt in default is more than Rs 264 crores, it would be more than Rs 1 crores by any calculat....
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.... the Hon'ble NCLT did not say that since 13 (2) Notice is served, the service of Rule 7 (1) Notice is not necessary - but came to the above conclusion after dealing in detail with the facts and circumstances of the present case, which did not leave an iota of doubt about the liability and default of the Appellant being the PG for credit facilities advanced to the CD. Thus, this objection of the Appellant also deserves rejection. 26. All the challenges, allegations of the Appellant are only technical in nature to divert the attention which have no bearing on the Section 95 IBC Application. Thus, they cannot be entertained and are denied strongly. The Appeal is without merit. Therefore, in view of the above, the Impugned Order dated 13.06.2024 as passed by the Hon'ble Adjudicating Authority is perfectly legal and justified. Thus, no interference in the said Impugned Order is called for in this Appeal. Appraisal 27. Heard Counsels from both sides and also perused materials on record and noted the directions of the Hon'ble Supreme Court in Civil Appeal No. 8622 of 2024 in its Order dated 20.08.2024 of which the relevant extract is as follows: "1. The Appeal arises fro....
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....les, 2019, dated 28.06.2021 was sent to the wrong address by the Financial Creditor; iii. Whether the amount sought in the Demand Notice and the Section 95 IBC Petition are vague; iv. Whether the Demand Notice under Rule 7(1) of IBC Rules, 2019, and the Section 95 IBC Petition has no foundation of the loan amount of SBBJ Bank; and 30. Since all the issues are intricately related with each other, wherever possible they are being dealt in separately. 31. Firstly, we look into the issue relating to the non-service of the Rule 7(1) Demand Notice in IBC proceedings of Section 95. It is contended by the Appellant that the Demand Notice under Rule 7 was sent at E-14/13, Ground Floor, Vasant Vihar, New Delhi-110070, which was the address of the Company in liquidation (as on 08.10.2012) and where the Appellant was residing in 2012 till possession was taken over by OL. It is the contention of the Appellant that Respondent-Bank was aware of 64 Poorvi Marg since 2014 as the summons in O.A. No. 133 of 2014 were sent to Poorvi Marg address of the Appellant. Also, in RC No. 416 of 2018 the Income Affidavit dated 10.11.2020 was filed by the Appellant with advance copy to SB....
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....sting parties in the Impugned Order dated 13.06.2024, has reached the following conclusion: "28. We are therefore of the considered view that non-service of demand notice as alleged by the Respondent-Corporate Debtor (sic. Personal guarantor) will not absolve the Respondent Personal Guarantor from discharging its liability under the Deed of Guarantee. Particularly, in view of the fact that the Personal Guarantor has not denied the execution of the Personal Guarantee and service of the notice under 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002." 33. It is vehemently contended by the Appellant that the above observation in the Impugned Order that the non-service of Demand Notice to the Appellant will not absolve him from discharging his liability as the Appellant has not denied the service of Notice under Section 13(2) of SARFAESI Act is totally illegal. It is claimed that Rule 7 Notice cannot be substituted with Section 13(2) SARFAESI Notice. The nature of both the Notices are entirely different and one cannot substitute the other. The Appellant has given an example of a cheque bouncing notice under Sec....
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....tion till date. No decree has been passed in the same. After almost 7 years, the Respondent No.1-SBI sent a Demand Notice dated 28.06.2021 (pg 541 to 545 of APB), under Rule 7(1) of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process Guarantors to Corporate Debtors) Rules, 2019, for initiating Section 95 proceedings against the PG. This Notice claimed a demand of Rs 264.61 crores (approximately), with a date of default of 25.01.2014, which includes not only the credit facilities provided by SBI, but also by SBBJ (pg 542 of APB) - as by that time the two banks - namely SBI and SBBJ had merged into SBI as on 31.03.2017 and the Notice combined demands of both banks without specifying details of individual accounts. Perusal of the Sl. No. 3 and 4 in the particulars of debt (at pg 541 of the APB) show that due date was 26.12.2013 and the default had occurred on 25.01.2014. The relevant extract is reproduced as follows: "FORM B [SEE RULE 7(1)] FORM OF DEMAND NOTICE Under Rule 7(1) of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process Guarantors to Corporate D....
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....AESI Act. 25.03.2014 The Applicant Bank filed an Original Application bearing no. OA No. 133 of 2014 before DRT -II. 28.06.2021 The Applicant Bank sent demand notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtor) Rules, 2019 upon Mr. Bahrudeen Nooral Ameen Mahdoom Bava (Personal Guarantor). 5. Nature of the debt Unsecured Debt." 38. Perusal of Form B and Form C [as extracted above] and SARFAESI Act Demand Notice shows that: Accounts of the Company had become NPA on 13.06.2012 (SBI)/ 28.01.2012 (SBBJ); both SBI and SBBJ had not merged at that point of time. Section 13(2) Notice dated 26.12.2013 under SARFAESI Act was issued by SBI to the Company with a demand of about Rs 64.48 crores. Rule 7(1) Notice dated 28.06.2021 under IBC proceedings shows demand of about Rs 264.61 crores as on 31.05.2021. These were for four account numbers -two relating to SBI and two to SBBJ but without details of individual account numbers. Section 95 r/w Rule 7(2) Application dated 03.12.20....
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.... was made from the Appellant. Since Demand Notice under Rule 7(1) was issued on 28.06.2021, and the Application under Section 95 was filed on 03.12.2022, we find that the said Application is prima facie beyond three years and is time barred. Without giving the details of each account, the Respondent No.1-SBI cannot overcome the limitation. A defence of the covid period has been taken by the Respondent-Bank. Even after excluding the covid period from 15.03.2020 to 28.02.2022, which is as per the Orders dated 10.01.2022 of the Hon'ble Supreme Court in Suo Moto Writ Petition (C) No. 3 of 2020, we find that the Rule 7(1) Notice has been issued much beyond three years. This argument, therefore, doesn't come to help of the Respondent-Bank. We therefore, find that the notices for debt and default under Rule 7(1) and Rule 7(2) are issued much beyond three years from the date of default and are therefore barred to be proceeded under the Limitation Act. 42. It is claimed by the Respondent-Bank that during the hearing before the Adjudicating Authority on 29.05.2024, the issue of limitation was argued, and as the Counsel for the Appellant had no objection to the filing of the Order dated 17....
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....re than Rs 1 crore. It contends that if mere technical objections are entertained then no resolution would ever be successful even when there is a clear debt and default on the part of the Appellant and no prejudice has been caused to the Appellant. 44. To understand whether O.A. No.213/2013, as noted above, supports the case of the Respondent Bank, we note that the SBBJ had filed O.A. No.213/2013 before Hon'ble DRT, New Delhi in which the judgment and decree for Rs 17.63 crores were passed on 17.03.2018 in this matter. It is to be noted that the O.A. No. 213/2014 was allowed by Order dated 17.03.2018 and the recovery certificate was issued on 17.03.2018 while the Section 95 IBC Petition has been filed by the Respondent No. 1-SBI on 03.12.2022, which is much later in time. Even then these RC proceedings, if they were of any help, do not find mention in the Section 95 proceedings, when they were filed. 45. To know the veracity of the claims of the Respondent-Bank, we test the Section 95 Application against the provisions of the Code and we find some crucial omissions and deficiencies in this application. For appreciating them, the relevant Sub-Section 4 of Section 95 is extrac....
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....pondent that the question of limitation was waived by the Appellant, since the Appellant consented to take on record Order dated 17.03.2018 is also not tenable as the Appellant clearly distinguished the amount of Rs 315 crores sought in the Section 95 Application from the decree passed in favour of SBBJ, which has been further noted by us separately in the judgment. As found by us in the earlier parts of our judgement, the outstanding demand with respect to the account of unmerged SBI bank was time barred. Whether limitation gets extended or not needs to be specifically concluded after linking appropriate SBBJ account numbers with both the account numbers in OA 213/2024 and also Section 95 application. 46. In conclusion, we find that the Applications under Rule 7(1) or Rule 7(2) / Section 95 have been deficient in providing details of individual accounts with respect to amounts, date of defaults, statement of accounts and dates of Notices and linking each individual account with the total amount claimed in the Section 95 Application. By providing a broad figure of Rs 315 crores, the demand becomes vague. Further directly linking of Application under Rule 7(2) / Section 95 with D....
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....ely. Be that as it may, in the interests of natural justice we find it appropriate to remand this case back to the Adjudicating Authority to examine all the objections relating to the details of individual accounts and their dates of default and whether debt is time barred - in full or in part amount - due to RC under SARFAESI Act 2002 and arrive at a conclusion. Order 49. Accordingly, in the facts and the circumstances of the case, the personal insolvency proceedings are remanded back to the Adjudicating Authority to determine afresh the limited question of whether on the basis of the materials on record the debt is barred by limitation or not and whether in full or in part amount and accordingly determine the issue of personal insolvency against the Appellant. Both parties are at liberty to raise all contentions before the Adjudicating Authority with respect to the issue in hand for determining whether the debt is time barred or not and whether for full or part amount and whether Section 95 proceedings are maintainable or not. The order impugned dated 13.06.2024 is set aside. We make it clear that we are not expressing any concluded opinion on the issues raised and it is fo....